Question

Pisa​ Pizza, a seller of frozen​ pizza, is considering introducing a healthier version of its pizza that will be low in cholesterol and contain no trans fats. The firm expects that sales of the new pizza will be $ 25 million per year. While many of these sales will be to new​ customers, Pisa Pizza estimates that 50 % will come from customers who switch to the​ new, healthier pizza instead of buying the original version. a. Assume customers will spend the same amount on either version. What level of incremental sales is associated with introducing the new​ pizza? b. Suppose that 55 % of the customers who will switch from Pisa​ Pizza's original pizza to its healthier pizza will switch to another brand if Pisa Pizza does not introduce a healthier pizza. What level of incremental sales is associated with introducing the new pizza in this​ case? a. Assume customers will spend the same amount on either version. What level of incremental sales is associated with introducing the new​ pizza? The incremental sales associated with introducing the new pizza will be ​$ nothing million.  ​(Round to two decimal​ places.) b. Suppose that 55 % of the customers who will switch from Pisa​ Pizza's original pizza to its healthier pizza will switch to another brand if Pisa Pizza does not introduce a healthier pizza. What level of incremental sales is associated with introducing the new pizza in this​ case? If 55 % of the customers who will switch from Pisa​ Pizza's original pizza to its healthier pizza will switch to another brand if Pisa Pizza does not introduce a healthier​ pizza, then the incremental sales will be ​$ nothing million

Answer 1

A:incremental sales = 50%*Sales of new pizza

= 50%*25 m = 12.5 million

(this is because 50% of the sales of new pizza will be from existing customers at hence only the other 50% will be the incremental sales)

B: incremental sales= 50% from new customers+ 55%* 50% from the existing customers

= 50%*25m+ 55%*50%*25m

= 12.5m+ 6.875m

= 19.375 million